Important decisions for company’s production are the use of subcontractors, location of facilities, capacity, technology used and production methods, organization and manage-ment. The core idea of production strategy must be in line with the overall business strategy. At the beginning, companies have chosen their competitive advantages they are aiming for and based on them, the production strategy should be built. These deci-sions will affect the quality of the end-product. (Viitala & Jylhä, 2013)
Based on the ESTIMATE -platform, Amrani, Zouggar, Zolghadri and Girard (2010) state that in engineer-to-order companies there are ETO components and so collect MAM-parts in which they refer to components that can be designed and manufactured before-hand. They recommend companies to have different processes for these two types and support them with supplier and customer relationship management and assembly
database. According to them, the process of the creation of ETO products includes find-ing the suitable solution and engineerfind-ing, choosfind-ing the supplier and data creation of the new part. The data about the customers should be collected into IT-system and analysed because that information can be used in the further for offer and customer order gener-ations which reduces lead times. Also, the use of Bill of Materials helps gathering im-portant data about the components sold. (Amrani, Zouggar, Zolghadri, & Girard, 2010).
Adrodegari, Bacchetti, Zanardini, Pinto and Pirola (2015) found in their case study that ETO companies had quotation and order management, technical and market develop-ment, design, purchasing, delivery, commissioning and after-sales services as their core activities in production planning processes. Supportive activities were planning, cost-control and project management. These supportive activities were used to improve the efficiency of the core functions. They discovered that the poor performance in produc-tion planning and project management resulted from the lack of software support and managerial procedures. They highlight the importance of project management and plan-ning in ETO environments because most of the ETO orders can be seen as projects and appropriate planning can lead to cost-reduction and shorter lead times which both are required to fulfil the customers’ needs. They created a framework for production plan-ning which considers all the phases in OTD process. (Adrodegari, Bacchetti, Zanardini, Pinto, & Pirola, 2015)
Haug, Ladeby and Edwards (2009) state that engineer-to-order companies can struggle with changing their production towards more mass customization because postponing the differentiation of products is not as easy as in mass production companies. In many cases, standardization of products leads to more cost-efficient production and the re-searchers recommend companies in ETO environment to focus on the parts that can be mass customized rather than turning their products into mass production. The aim for optimizing business processes and decrease in manufacturing cost are seemed as fea-tures that encourage companies transforming their ETO operations towards mass cus-tomization. (Haug, Ladeby, & Edwards, 2009)
Willner, Powell, Gerschberger and Schönsleben (2016) determined the architypes of ETO companies and the most suitable design standardization strategies for each type. Com-plex ETO is a type where the products require huge amount of engineering because of the complex products and the researchers noticed that the capability for standardization remains extremely low. Basic ETO requires less engineering because in these companies it is common to use modules which require only little customization and these compa-nies do not receive standard customer orders. These types are close to make-to-order strategy which together with more automated offer creation for customers can reduce the need for engineering and new knowledge creation. (Willner, Powell, Gerschberger,
& Schönsleben, 2016)
Willner, Powell, Gerschberger and Schönsleben (2016) state that the third type is identi-fied as repeatable ETO which refers to companies that manufacture with make-to-order strategy and therefore postpone the modification after the sales order is received. Mar-kets enable these companies to receive lots of orders which leads to higher possibilities in standardization of production and engineering solutions. They recommend companies to evaluate their average sales and the complexity of their products when they want to determine which type they belong to. (Willner, Powell, Gerschberger, & Schönsleben, 2016)
Willner, Powell, Duchi and Schönsleben (2014) found that if companies are aiming to change their strategy towards make-to-order and move the order penetration point, they should offer customers different part and component options from which they could choose what they want. This way the lead times would be shorter, but the products still be customized. They say also that companies that provide customized solutions are having a competitive advantage, but they should additionally acknowledge that custom-ers are no longer willing to pay extra from customization. (Willner, Powell, Duchi, &
Schönsleben, 2014)
According to Vollmar and Gepp (2015) standardization programs can follow procedure model framework which includes preparation, hierarchization, modularization and standardization phases. Preparation includes tasks like defining goals, managers involve-ment and evaluating the strategic fit of future actions. Hierarchization holds, for example, defining parts which can be standardized by modulization, identification of processes and which tools should be used. Product structures are determined and grouped into modules in modularization-phase. In this phase the researchers recommend focusing on creating organizational culture which can support the maintenance of the new ways. In the final phase, companies must perform the final adjustments and manage and control the performance. (Vollmar & Gepp, 2015) According to Gepp, Foehr and Vollmar (2016) the benefits from standardization and modularization are decrease in purchasing, pro-duction and defective costs, less engineering hours are needed, and it supports on-time deliveries. Even so, companies have to evaluate how much they are in need of these changes because they require resources, such as time, money and employees, determi-nation of KPI’s, understanding of the operations and suitable methodologies and sup-portive organization. (Gepp, Matthias, & Vollmar, 2016)
Flexibility in production helps companies to focus on customers’ requirements and to provide faster delivery times by reducing the cycle time. Flexibility can be achieved by using the subcontractors and agile production philosophy for example. Agile production reacts on changes better than old production methodologies because its core idea is openness in information sharing and equality between all partners. Problems with flexi-bility in capacity can be solved with networking, outsourcing or with the use of subcon-tractors. (Viitala & Jylhä, 2013)
Yang (2013) found that production planning, human resource management, quality management, processes maturity, schedule and suppliers’ stability are affecting produc-tions performance in ETO manufacturing. Better practices on these areas will provide better quality, flexibility and cost control. Yang recommends the use of just-in-time sys-tem and improving scheduling as solutions for better production planning. He reminds
about the importance of standardized processes and realistic schedules for the products delivery. (Yang, 2013)